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RBI keeps policy rate unchanged at 5.25% for fifth time in row

05 Aug 2026 Evaluate

In an expected move, the Reserve Bank of India's (RBI) Monetary Policy Committee (MPC) unanimously decided to keep the policy repo rate under the liquidity adjustment facility (LAF) unchanged at 5.25 per cent for the fifth time in a row. Consequently, the standing deposit facility (SDF) rate remains at 5.00 per cent and the marginal standing facility (MSF) rate and the Bank Rate remain at 5.50 per cent. The MPC also decided to continue with the neutral stance.

On the inflation front, CPI inflation for 2026-27 is projected to be 5.0 per cent, which is lower than 5.1 per cent projected in the June monetary policy review. Besides, CPI inflation for Q2:2026-27 projected at 4.7 per cent; Q3 at 5.9 per cent; and Q4 at 5.5 per cent. Inflation for Q1:2027-28 is projected at 5.3 per cent with risks being evenly balanced. Core inflation is projected at 4.3 per cent for 2026-27. Core inflation, excluding precious metals, is expected to be lower in the near term, suggesting that demand pressures remain contained. 

It said headline CPI inflation edged up above the target, as expected. The realised inflation for Q1, however, remained marginally lower than projections reflecting limited pass-through of cost pressures. The higher inflation is mostly on account of fuel and food with little signs of generalisation of price pressures so far. Core inflation excluding precious metals continues to be benign. As projected earlier, headline inflation is expected to rise further in the near term and peak in Q3:2026-27, primarily due to food and fuel, before moderating thereafter.

On the economy front, real GDP growth for 2026-27 is projected at 6.7 per cent, which is higher compared to 6.6 per cent projected in the June monetary policy review. Besides, GDP growth for Q1:2026-27 projected at 7.0 per cent; Q2 at 6.4 per cent; Q3 at 6.5 per cent; and Q4 at 6.8 per cent. Real GDP growth for Q1:2027-28 is projected at 7.3 per cent. Strong capacity utilisation, robust credit flow and the government’s continued thrust on infrastructure are expected to sustain investment activity. While services exports are expected to sustain, merchandise exports will be supported by the recent trade agreements and thrust on diversification. 

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